Online Pawn Shops Might be the Ticket for Quick Holiday Cash

NEW YORK (MainStreet) — When Thomas Fischer, who lives in Detroit, Mich., learned 10 days before Christmas that his father might have surgery at the beginning of the year, he decided he needed to make a trip during the holidays to visit his parents in Tampa, Fla.

“I knew I had a bonus coming, but didn’t have the cash on hand at the time,” says Fischer, a pharmaceutical representative. “Flying is never cheap during the holidays, and it’s even more expensive at the last minute.”

Fischer had some items he thought would be worth pawning, but says he had never been into a pawn shop. “Pawn shops are sometimes not in the best of areas,” Fischer says “I started looking at online pawn brokers.”

Fischer found Pawntique, an online pawn broker, spoke to a representative and decided to pawn a 1952 Mickey Mantle baseball card from his collection. He said the process was very easy; he sent a photograph of the baseball card, got an appraisal and used an emailed label to send his card to the company.

The agreed-upon money came within 36 hours, he says. “There is always nervousness when putting something like that into someone’s hands, but I felt comfortable doing business with them after talking to them,” Fischer says. “It was very important for me to see my parents, and it is only a baseball card. I could get another one of those, but I can’t get more parents.”

Fischer saw his parents – his father is fine – paid off the loan with his bonus within 1.5 months as planned, and the baseball card is back in his collection.

Don Battis, CEO of Pawntique, a 1-year-old company in Portsmouth, N.H., has only one holiday season under his belt, but says his company saw a lot of business last year from people looking to pawn items for quick holiday cash.

Some of his clients, like Fischer, either didn’t want to use their credit cards for some reason or didn’t have the credit readily available.

An old industry gains new ground

The pawn shop industry is literally thousands of years old, and there are an estimated 12,000 pawn brokers in the United States. With the popularity of shows such as Pawn Stars more people are becoming familiar and even more comfortable with an industry that has sometimes had somewhat of a seedy reputation.

The online pawn industry seeks to burnish that reputation even more, Battis says. “At a bricks-and-mortar pawn shop, a lot of their clients do not have credit cards,” Battis says. “Our clientele is more upscale. The majority have credit cards, and most of our clientele has never been to a pawn shop before.”

Battis says another major difference is that online pawn brokers typically charge less interest than the average 20% per month rate at brick-and-mortar pawn brokers. Pawntique’s rate is typically 6% per month, and it offers three months with no payments.

Online pawn brokers also have higher minimums, and onsite appraisers for higher-end items. Pawntique’s minimum is $500, with average loan amounts being around $2,000. Bricks-and-mortar pawn brokers average loan amount is between $150 and $175, Battis says.

About 65% of Battis’ business comes from small-business owners who need quick cash flow. “If a business owner finds a good deal on some inventory but doesn’t have the cash at the moment, it might make sense to take a loan on something at 6%,” Battis says.

The last benefit is the biggest for most of his clients, Battis says: the anonymity that comes with an online pawn broker. It was a major benefit Fischer considered.

Battis says 80% of items pawned with his business is reclaimed. The amount people get for items depend on its appraised value, but generally, he says most items bring at least 50% of the value. Battis says his business pays 70% to 75% percent of the spot gold price as well.

As with other pawn businesses, people can also sell their items outright. “If there is no sentimental attachment, it doesn’t make sense to pay the interest,” Battis says.

Beverly Harzog, a credit expert and consumer advocate in Atlanta, says that anytime people are considering a loan, either from a credit card or a pawn broker, they should check the interest rates and weigh all of their options.

Harzog says that even getting a cash advance on a credit card can cost up to 25%. “In general, I'd advise people to be very cautious about using an online pawn shop because some of the interest rates are very high,” Harzog says. “Even if you know you can pay off the loan quickly, you need to run the numbers and determine how much it will cost in interest.”

Most finance experts suggest creating a budget for the holidays and sticking to it. But if there is an emergency, Harzog advises, “The best thing to do is go into a loan from an online pawn shop with your eyes wide open, read the fine print and estimate the total cost ahead of time. And really, if you aren't sure you can pay it back quickly, this isn't a good idea at all.”